Diversified Energy Co. Plc has closed its deal with Summit Natural Resources to buy operated natural gas assets and midstream infrastructure for approximately $42 million, the company said Feb. 27.

The assets, located in the Appalachian Basin in Virginia, West Virginia and Alabama, overlap Diversified’s existing operations and include coal mine methane volumes.

The acquisition benefits from “higher prices with exposure to premium Transco Zone 5 pricing, and [Diversified is] poised to provide additional revenues from the sale of incremental environmental credits with our growth in the production of coal mine methane,” said CEO Rusty Hutson Jr.

“We continue to believe there is a sizeable backlog of organic coal mine methane cash flow growth within our current Appalachian portfolio, and this acquisition highlights our ability to leverage existing capabilities, assets and intellectual capital to grow this segment of our revenue stream.”

The deal was originally announced in January for a purchase price of about $45 million. Detring Energy Advisors advised Summit Natural Resources on the transaction.

Diversified also announced the closing of a $530 million asset backed securitization, the ABS X note, which will use the Summit assets as collateral. The note is structured as a master trust and includes strategic hedges which are expected to add about $38 million to EBITDA of refinanced assets, Diversified said.

Proceeds from the ABS transaction will be used to consolidate and repay the outstanding principal of the previously issued ABS I, ABS II and Term Loan 1, which will also be used as collateral in the ABS. 

“This ABS transaction achieved record demand with a significant amount of interest from a large group of new participants. This strategic refinance improves asset level cash flow with higher hedge prices and a more refined amortization schedule,” said CFO Brad Gray. “Our increasing operational scale, track record of stable asset performance, and strength of our business enable us to attract reliable sources of capital and achieve a lower overall cost of capital."

Barclays Capital Inc. acted as sole structuring adviser and placement agent; Mizuho Securities USA LLC, KeyBanc Capital Markets Inc. and Legado Capital Advisors LLC acted as co-placement agents for the securitization.

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